16 Real Answers to Your Business Credit Questions Ilya Bodner Initial Underwriting

Ilya Bodner is a successful entrepreneur and owner of Initial Underwiting Group, an organization that underwrites business loans for owners that are ready to start up or expand a small business. In a recent interview, Mr. Bodner answered some of the most frequently asked questions that are on the minds of business owners when they need financing and commercial loans.

How did you get involved in business credit?

I needed to raise money for my first business venture; being young and just out of college my personal credit could not support $250,000 loan.  I found out about Dun & Bradstreet and spent 3 years carefully learning its methods and lenders that use that information.

Why did you decide to help small businesses obtain loans?

I got $250k for my own business through the use of business credit, realized that a lot of business owners don’t know about business credit and decided to cater to the demand.

What is the worst mistake you see small business owners make?

Being undercapitalized - Worst mistake is not to plan for unpredicted expenses, loose projections, and shift in demand; which all contributes to increased spending and lowered sales.

Do you think it is fine for new business owners to borrow money from people they know?

No, I don’t think it is fine to borrow from people you know - If you undercapitalize, you tend to go to friends and family for immediate money.  Otherwise, borrowing with caution and enough reserves to pay back in case of total loss, is the only acceptable method of borrowing from your loved ones.

Do you see a trend in why small business owners get rejected for loans?

High Risk – the lenders see a small business owner as a renegade who may or may not pay back the loan + interest.   3 out of 4 businesses don’t survive; and the small percentage of small businesses that do survive end up defaulting at some point. 

Is there a way to apply for a business loan without revealing your personal credit history?

Yes, some banks offer business credit based programs.

In your experience do you see business owners without business credit, get lines of credit and business credit cards?

Yes, they take the steps to establish a strong business credit profile and go to the right lenders.

Can a business owner apply for a business loan if they declared bankruptcy sometime in the past?

Yes, only if a strong business credit profile already exists. Apply with a lender that offers business credit-based financing.

How should one establish business credit when just starting out?

Establish a legal entity with an EIN number first.  Then, apply for a Dun & Bradstreet number and an Experian report – both are free.  Lastly, sway 6 vendors to report payment history (this part is tricky if you don’t have the leisure of time).

Do your business credit habits automatically get submitted to the business credit reporting agencies?

No - Reporting can be done by all; however, automatic reporting is done by only a few vendors and lenders. 

Is it easy to get financing once you have a business credit profile?

Nothing is easy in the current state of our credit-crunched lending sector.  By having business credit a business is open to more lending options.

Is the SBA the only resource for small business loans?

Not anymore – more and more banks offer business credit based financing.

Will the current situation in the banking industry and the economy affect a new business owner’s ability to get a loan?

Yes, for those that don’t have business credit.

Will a business owner be expected to pay high fees when they apply for business-credit based financing?

No, these are the same banks and the same lending guidelines – pulling business credit reports, not personal credit scores.

Can a business owner, without business credit, get lines of credit and business credit cards?

Yes, take the steps to establish a strong business credit profile and go to the right lenders.

Any tips for all of us who are looking for loans to expand, start, or restructure our business?

Just like you take the time to go to an accountant for tax advice and preparation (regardless if it is your first year of operation or tenth year), spend some time with a business professional to prepare and take advice on strong business credit.